Bloomberg News

Coca-Cola Profit Rises on Healthier Drinks as Volume Trails

February 12, 2013

Coca-Cola Fourth-Quarter Profit Advances as North America Gains

Coca-Cola Co. signage is displayed in the window of a restaurant in San Francisco, California. Photographer: David Paul Morris/Bloomberg

Coca-Cola Co. (KO:US), the world’s largest soft-drink maker, said fourth-quarter profit rose 13 percent as sales of non-carbonated drinks in North America such as Powerade helped counter lower demand in Europe.

Net income climbed to $1.87 billion, or 41 cents a share, Atlanta-based Coca-Cola said today in a statement. Excluding restructuring costs and other items, profit was 45 cents a share, compared with the 44-cent average of 13 analysts’ estimates (KO:US) compiled by Bloomberg.

Chief Executive Officer Muhtar Kent is working to meet growing consumer demand for healthier beverages with products such as Simply Orange, Honest Tea and Powerade. Global volume sales rose 3 percent in the quarter, trailing the 5.4 percent growth estimated by Mark Swartzberg, an analyst at Stifel Financial in New York, who has a hold rating on the shares.

“Global diversification continues to pay dividends for the company even though you might have a little bit of softness in some regions like Europe, China or North American carbonated soft drinks,” Thomas Mullarkey, an analyst for Morningstar Inc (MORN:US). in Chicago, said today in an interview. “It’s still able to grow unit case volume globally.”

Mullarkey has a three-star rating on the shares, the equivalent of a hold.

Global Volume

Coca-Cola fell (KO:US) 2.7 percent to $37.56 at the close in New York. The shares have increased 3.6 percent this year, compared with a 6.5 percent gain for the Standard & Poor’s 500 Index.

Revenue advanced 3.8 percent to $11.46 billion. Analysts estimated (KO:US) $11.5 billion. A year earlier, net income totaled $1.66 billion, or 36 cents a share, on revenue of $11 billion.

North American volume sales rose 1 percent in the quarter. Sparkling beverage volume in the region declined 2 percent, while still beverage volume advanced 8 percent, driven by demand for the Powerade energy drink.

The sluggish European economy damped demand in the region, where volume sales declined 5 percent. Stifel’s Swartzberg said analysts were anticipating volume in Europe to be little changed. Euro-area economic data due this week are expected to show the worst quarterly decline in output for almost four years.

European Declines

Euro-area gross domestic product shrank 0.4 percent in the fourth quarter, according to the median of 45 estimates gathered by Bloomberg News. That would be the biggest decline since the first quarter of 2009, when GDP fell 2.8 percent in the wake of the collapse of Lehman Brothers Holdings Inc. The data is due to be published on Feb. 14.

The company, which now bottles about 80 percent of its drinks volume sold in the U.S., announced today it was paring the number of distribution regions in its bottling unit to cut costs and improve efficiency.

The Coca-Cola Refreshments bottling unit will be reduced from seven into three regional territories -- East, Central and West. Kent has worked to restructure distribution in the U.S. since buying (KO:US) the North American operations of Coca-Cola Enterprises Inc. in 2010.

“We’re trying to get better,” Kent said in an interview today, referring to the move. “We’re trying to be the best in terms of how we serve the customer.”

Franchise Bottlers

Kent reiterated that there would be “a meaningful role for partners” to take over pieces of the North American bottling operation Coca-Cola now owns, without elaborating. Kent stuck to his forecast that such a move may happen within another two to three years. The outcome may look different than in the past, he said, when franchise bottlers bought the right to do everything from package to merchandise Coca-Cola’s products in a given territory.

“This will not necessarily look like a full template of a traditional refranchising,” Kent said.

Coca-Cola is trying keep U.S. sales growing amid criticism that sweetened drinks contribute to the nation’s obesity epidemic. The company last month started airing advertisements to bring attention to the importance of exercise and calories in curbing obesity. The first two-minute spot aired on cable television on Jan. 14, highlighting Coca-Cola’s low- and zero- calorie products.

To contact the reporter on this story: Duane D. Stanford in Atlanta at dstanford2@bloomberg.net

To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net


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Companies Mentioned

  • KO
    (Coca-Cola Co/The)
    • $41.03 USD
    • 0.17
    • 0.41%
  • MORN
    (Morningstar Inc)
    • $63.99 USD
    • -0.25
    • -0.39%
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